Experimental Estimates of the Barriers to Food Stamp Enrollment

Transcription

1 Institute for Research on Poverty Discussion Paper no Experimental Estimates of the Barriers to Food Stamp Enrollment Diane Whitmore Schanzenbach Harris School of Public Policy University of Chicago September 2009 I thank Emmanuel Saez and Esther Duflo for their involvement in this project, and the Policy Evaluation Project staff at H&R Block, led by Bernie Wilson, John Thompson, Jeremy White and Scott McBride for implementing the experiment. Special thanks go to Yvette Ruiz and Alessandra DelConte Dickovick for project management, and to Food Stamp staffs in San Francisco and the State of California for providing data and feedback. Rebecca Blank, Stacy Dean and Jeff Kling provided helpful comments. I gratefully acknowledge funding from a USDA RIDGE grant, administered by IRP at the University of Wisconsin. IRP Publications (discussion papers, special reports, Fast Focus, and the newsletter Focus) are available on the Internet. The IRP Web site can be accessed at the following address:

2 Abstract In the post-welfare reform era, Food Stamps have become an increasingly important aspect of the social safety net. Yet, take-up rates for Food Stamps are relatively low, especially among low-income working families, who may be more sensitive than non-workers to perceived stigma associated with Food Stamps. In particular, many potential recipients are under the impression that Food Stamp benefits are still paid as the name of the program suggests in special coupons that are stigmatizing to use at the grocery store. Today, though, benefits are paid via a card (EBT) that looks and feels much like a credit card, and can be swiped at the grocery store checkout line using the same card reading machine that is used for credit and debit card purchases. This paper describes the results of a randomized experiment conducted through H&R Block Tax Preparation offices in two California counties that offered to help potentially eligible clients in the Food Stamp Program. In some offices, the outreach program used language and brochures consistent with the standard Food Stamp outreach materials distributed by the USDA. In other offices, the outreach materials played up the lack of stigma in today s program by describing the EBT card and the ease of its use. We find that individuals are much more likely to respond favorably to the outreach program if it highlights the lack of stigma. A second experiment offered a random subset of these respondents additional assistance in filling out the application form and filing it on their behalf directly with the county Food Stamp office. Respondents were more likely to successfully enroll in the program if they received more assistance in filing their application.

3 Introduction Many eligible families fail to receive Food Stamp benefits. Although the exact take-up rates are difficult to measure because of data limitations, recent research suggests that 65 percent of eligibles overall enroll in the FSP, and fewer than 50 percent of eligible working families participate in the FSP (FNS, 2007). This paper describes a randomized trial of a food stamp outreach program, conducted in partnership with the H&R Block tax-preparation firm. The outreach was designed to address two main questions: First, what is the impact of program presentation on take-up rate? And, second, how would a streamlined food stamps enrollment procedure affect program take-up? The outreach was conducted in 56 H&R Block offices in two California counties, San Francisco and Alameda (where Oakland is located). Prior to implementation of the experiment, take-up rates in San Francisco and Oakland were estimated to be quite low fewer than 21 percent and 42 percent, respectively, of potentially eligible working families sign up for benefits (Fellows and Berube, 2005). Of course, H&R Block clients are not a random sample of all taxpayers, but the clientele there who are likely to be low-income working families is of special interest to policy makers. 1 Low-income working families may be more sensitive than non-workers to perceived stigma, or to time-costs associated with enrollment. Since benefits and administrative costs are paid almost entirely out of Federal money, there is a growing demand by state governments to increase participation in the food 1 As an example of H&R Block s clientele, they prepare about 12 percent of all individual U.S. tax returns. In addition, one quarter of all returns claiming the EITC were filed through H&R Block offices in

4 stamps program and to make its enrollment procedures more efficient. Researchers posit that stigma and the high cost of enrollment are two main obstacles to participation. Another important factor that may be at work is that potential recipients are unaware of their eligibility status (Bartlett et al., 2004). Low-income clients who came to H&R Block offices to prepare their taxes and who appeared based on last year s gross income to be income-eligible for food stamps were informed of the approximate monthly benefits they were eligible for and asked if they wanted to receive more information about the program. The outreach program comprised two separate experiments. First, we altered the language used to describe the food stamp program to try to offer a reduced-stigma outreach. Second, we randomly offered various levels of assistance with filing the necessary paperwork, ranging from no special assistance all the way to filing the application on the client s behalf so that the client never has to set foot in a county welfare agency. The main outcome of interest in the experiment is the effect on program take-up. It is highly probable that many low-income workers are unaware that they are eligible for food stamps at all, and if they are eligible, many may not bother applying if it involves large transaction costs. The primary experiment conducted here was to provide information and by working with state food stamp offices reduce the costs in terms of time and effort to enroll in food stamps. 3

5 Background on Food Stamps Food Stamp Benefits are generally usable at grocery stores to purchase food to be prepared at home. Benefits are paid in the form of Electronic Benefit Transfer (EBT) cards that are swiped at the check-out counter like a debit card with a PIN. EBT cards are automatically re-loaded every month. It is estimated that only about half of households eligible for Food Stamp Benefits actually participate in the program. There are 3 pieces to determining food stamp eligibility: gross monthly income, liquid assets, and a net monthly income test. A family s gross monthly earnings must be less than 130% of the Federal poverty line (which accounts for family size). Net income is calculated as gross income minus several categories of expenses: for example a standard deduction, 20 percent of earned income, child care expenses, and any shelter and utility costs that exceed 50 percent of net income. Most households are subject to a liquid asset limit of $2000, including cash, checking and savings accounts, and IRA/Keogh accounts less any early withdrawal penalties. This liquid asset limit has been the same in nominal terms since the 1980s. Tax refunds and advance EITC credits are disregarded from the income levels, but are counted toward the asset test. Benefit levels are the difference between the expected cost of food to maintain a nutritionally adequate low-cost diet and the expected household contribution to the grocery bill. The expected cost of food i.e. the maximum benefit for a family with no other income is approximately $115 per household member per month. The expected household contribution is 30 percent of the household s net income. The average 4

6 monthly benefit for recipients is $80 per person, with a minimum guaranteed benefit for eligible households of $10 per month. The Role of Stigma The canonical economic model of food stamps and other in-kind transfer programs focuses on how food stamps increase the total budget set of participants. In particular, if food stamps are inframarginal that is, they desire to consume as much or more food than their benefits will purchase then stamps are essentially the same as a cash transfer. On the other hand, if a family would prefer to consume less food than their food stamps are worth, the restriction that benefits can only be used to purchase food leads to some dead weight loss of utility, and may cause recipients to over-consume food. Schanzenbach (2008) finds that relatively few recipients fall into this later category. Taking into account a social planner s view of the food stamp program, Nichols and Zeckhauser (1982) show that in order to target recipients most in need of benefits, restrictions on the use of benefits or even imposing some amount of stigma when signing up for or using benefits may be optimal. Although there is little doubt that potential recipients take into account the perceived stigma involved in signing up for and using food stamps, little research has been done evaluating how responsive they are to shifting levels of stigma and changes in the time and ordeal costs of enrolling in the program. The experiment described below was designed to test the responsiveness of potential low-income, mostly working clients to a change in the perceived stigma of using benefits, and a change in the time cost of signing up for them. 5

7 Experimental Design The findings of this paper are based on a randomized trial of a food stamp outreach program that was conducted during the 2007 tax season, in partnership with the H&R Block tax-preparation company. The H&R Block clientele is ideal for this outreach. The lowest food stamp take-up rate is a among low-wage workers exactly those clients who come to Block for help with their taxes and EITC (Earned Income Tax Credit). These potential clients are the most likely to be sensitive to the issues of stigma and time-cost of application that we are studying. While the Block clients might not be representative of all potential eligibles, they are of crucial importance from a policy perspective. A. Tax preparation at H&R Block and the introduction of the experiment H&R Block is the largest tax preparer in the United States. It currently prepares over 16 million individual tax returns in 11,000 offices throughout the country, and prepares onequarter of all tax returns claiming the EITC. Clients typically come into an office with the documents (such as W-2 forms) necessary to complete their tax return. They sit at a desk (with privacy panels on both sides) with a Block worker called a Tax Professional and go through a computerized tax preparation program. The program looks like a DOS program, and typically asks one question per screen and progresses sequentially through the tax return. Typically, the client can read and follow the computer screens along with the tax professional. 6

8 The experiment was introduced after the clients completed their Federal and state tax returns, and after the program ran its final error check, and prior to the offering of other programs such as opening a retirement account or applying for a refund loan. If a client had an AGI less than 150 percent of the Federal poverty line (adjusted for family size), the program automatically showed a screen that asked if they were interested in learning more about benefits, gave an estimated range of the expected monthly benefits, and offered a $10 discount on their tax preparation fees for their participation. 2 The language on the introduction screen was randomly varied across offices, as described below under Test I. If the client expressed interest, then they were offered one of three types of randomly assigned levels of assistance with the application process, described below as Test II. Clients were not informed about which level of application assistance they would be offered until after they answered whether or not they were interested in receiving information about benefits, and Tax Pros were not told what the randomization rule was. Finally, clients were asked a few survey questions whether they had previously applied for FSP benefits, and if so what happened, and if not why not. After these questions, the outreach was concluded, and the regular tax interview process resumed. Tax Pros were compensated $1 per question screen completed, with a minimum payment of $5 and a maximum of $22 per interview. B. Test I: The effect of Stigma on Take-up The first hypothesis we studied was whether potential recipients would be more responsive to a made-over presentation instead of the standard food stamp program 2 Average tax preparation fees were about $130, and in San Francisco clients were also offered an additional $30 discount if they applied for the SF Working Families Tax Credit, which is essentially a bonus EITC payment given to SF residents who apply for the Federal EITC. 7

9 outreach materials. For much of the Food Stamp Program s history, benefits were paid as stamps. When recipients used them in the grocery checkout line, it was obvious that they were using government benefits to purchase their groceries. Today stamps are a thing of the past, and recipients receive government-issued Electronic Benefit Transfer (EBT) cards that are swiped like a debit card in the checkout line. But many non-participants are likely unaware of the EBT cards, and the name of the program likely still carries a stigma. As a result, many potential recipients may a-priori refuse to be screened for eligibility if the program is referred to as food stamps. In order to test whether the medium can be altered to make benefit receipt less stigmatizing, we offered two separate treatments. One treatment group (called the GSA treatment) received a pamphlet designed by a PR firm describing the Golden State Advantage card and the Food Stamp Program in (arguably) more positive terms than the standard USDA outreach materials. The control treatment group (called the food stamp treatment, or FS) will be asked whether they want to be screened for food stamps benefits, and were given a modified pamphlet that was designed to reflect the standard USDA outreach materials. 3 Examples of both types of presentations are in Appendix A. Each office was randomly assigned to be a GSA or FS office, and brochures and posters in accordance with the message were prominently displayed to reinforce the outreach. One-third of offices were assigned to the FS treatment group, and two-thirds were assigned to the GSA treatment group. C. Test II: Effect of Ease of Enrollment on Take-Up 3 The pamphlets were reviewed by the California Food Stamp administrators. 8

10 Another hypothesis to test is whether making the food stamps enrollment process faster and easier can indeed lead to higher take-up rates. There is speculation but little direct evidence that individuals do not sign up for Food Stamp benefits because the expected benefit is small relative to the cost of participating in the program (including the time and effort spent filling out forms and stigma associated with program participation, see Blank & Ruggles; McConnell & Ponza 1999). In order to test whether a simplified enrollment process can reduce the cost of signing, all offices were divided randomly into three categories: Basic, Plus, and Full-Assistance. For individuals randomly assigned to the Basic Group, the treatment consisted of the Tax Pro printing out a blank Food Stamps application with the address of the county agency. Clients were instructed to go there to complete the application. For individuals assigned to the Plus Group, the Tax Pro went through a more detailed interview that allowed them to fill out the food stamp application on behalf of the client. After the interview, the client was provided with a print-out of their completed application and the address of the county agency. Clients were instructed to take their completed application to the county agency to complete the enrollment process. Those assigned to the Full-Assistance group also went through the more detailed interview to fill out the actual food stamp application. At the end of that process, H&R Block filed the application on the client s behalf with the county directly. In order to complete the enrollment process, the county agreed to telephone the client. Thirty percent of clients were assigned to the Basic Group, and 35 percent were assigned to each of the Plus- and Full-Assistance Groups. 9

11 Data For clients who agreed to participate in the research study and signed consent forms, H&R Block provided to the researchers taxpayer-level data stripped of individually identifying characteristics. In addition, in accordance with the consent forms, client identifying information (but no tax information) was forwarded to the appropriate county. The county Food Stamps agency then searched its records based on name and SSN to determine whether the client applied for Food Stamps, and whether they successfully enrolled. Individual-level data in this draft of the paper are preliminary, and are only available from San Francisco County. Preliminary Results A. Descriptive Statistics Over 90,000 clients had their taxes prepared in the H&R Block offices involved in the outreach. Of those, approximately 20,000 (23 percent) met the eligibility criteria for the outreach, and were asked if they wanted information about FSP benefits. Conditional on expressing interest, 91 percent of respondents agreed to participate in the research study. The rates of eligibility and consent (conditional on interest) were the same across FS and GSA office types, and were the same by individual-level treatment assignment. B. Take-up Responses to Variations in Presentation Type 10

12 Evidence on the response to presentation format, aggregated across both counties, is displayed in Table 1. Overall, 25.8 percent of the non-enrolled eligibles expressed interest in the program in GSA offices, opposed to 20.9 percent in FS offices. Are there characteristics that predict whether a respondent is more sensitive to stigma, measured here as whether they are more likely to indicate willingness to participate in the Golden State Advantage Program instead of the Food Stamp Program? Because of confidentiality requirements, we only observe individual characteristics on those who indicate their willingness to participate. But because of random assignment of treatment types, we can assume that the underlying population characteristics are similar across office-type treatment groups. If the sample of participants varies across treatment type, then, that provides some indication about who responds differentially to the presentation message. Sample characteristics by office-level treatment are displayed in columns (1) and (2) of Table 2. Overall, there are few significantly significant differences between the groups, although respondents in GSA offices tend to have slightly fewer exemptions claimed (a proxy for family size) but the same total income, suggesting that the expected benefit levels are lower among GSA office clients who agree to participate. Put another way, on average clients are only willing to participate in the higher-stigma FS offices if the expected benefits are higher. In addition, GSA clients are statistically significantly more likely to report that they have a checking account, which suggests that clients that are perhaps more financially stable are more responsive to the lower-stigma presentation. For completeness, columns (3)-(5) repeats the summary statistics by individual-level 11

13 treatment. As expected because of the randomization, none of the differences across individual treatments is statistically significant. C. Responses to Enrollment Assistance Data on applications and enrollment are available for San Francisco County only at this point. Preliminary evidence on the enrollment response to various levels of assistance is presented in Table 3. San Francisco provided information on individuals applications to the Food Stamp program both prior to the outreach experiment and afterwards. This allows us to perform some additional checks that the randomization was done correctly. Column (1) in Table 3 presents information on applications for Food Stamp Benefits prior to January 1, 2006 (at which point our pilot survey began.) Overall, about 33 percent of the participants in the experiment had previously applied for benefits in San Francisco County. Prior application rates were slightly higher among the plus treatment group (i.e. the middle level of extra assistance), but no different for the full (i.e. the highest level) treatment group. Clients from the low-stigma, GSA offices were 13 percentage points less likely according to the county to have previously applied for benefits, suggesting that the offices receiving GSA treatments may have been inadvertently less disadvantaged than those receiving FS treatment. Columns (4)-(6) represent the main results of the experiment. The dependent variable equals one if a client filed an application for food stamps with the county after January 1, 12

14 2007 when the experiment began, and before January 1, Overall, 22 percent of those in the control group i.e. those that were informed of their potential eligibility and given basic instructions but no special assistance with filing their application applied for benefits. Those that received the middle level of treatment had about the same application rate. Those that were assigned to the full treatment received the most assistance with their application were about 18 percentage points more likely that is, almost 80 percent more likely to apply for benefits. Even though those from GSA (low-stigma presentation) offices were less likely to have had a prior history applying for benefits, they were statistically just as likely to apply for benefits as those in FS (regularstigma presentation) offices. The results are little changed whether office type effects or specific office fixed effects are included, as one would expect if the experiment was properly implemented. Columns (7)-(9) limit the dependent variable to those who have a successful application, or one that was still pending at the time the data were provided to us. The results are quite similar if the dependent variable is limited in this manner. The total amount of benefits received did not vary across treatment types, but those data are only available through July 2007 and only about one-third of applicants had received any benefits payment by that point. Recall, the total population here includes H&R Block clients from San Francisco only who 1) appeared to be eligible based on tax year 2006 s income, 2) expressed interest in receiving information about the FSP, and 3) agreed to share their information with researchers. 13

15 These results suggest that counties could increase their food stamp participation rate by reducing stigma in outreach programs, or by reducing the burden of filling out the applications, as done in this experiment. Counties and states should have a substantial incentive to maximize the number of participants in the Food Stamp Program because all benefits and most of the administrative fees are paid by the Federal government. But the incentive to maximize participation is tempered by a few features of the program. First, states face stiff penalties if they have too high a rate of mis-payments (but are not penalized for low participation rates). As a result, if the marginal cases that would be drawn in by lowering the costs of enrolling are more likely to be error prone, states might be willing to increase the cost of enrolling in order to reduce their error rates. We cannot directly test this hypothesis in this experiment. Another factor that might increase the optimal cost of enrolling that the local government will desire to set is that once a client walks into a county agency to sign up for the Food Stamp Program, they might be more likely to sign up for other benefits that they are eligible for, in particular the Medicaid program. Since Medicaid is block-granted to the states, from a purely budgetary standpoint, local governments may not want to encourage enrollment in the program. We can test whether those exposed to less costly Food Stamp enrollment procedures are also more likely to apply for Medicaid benefits by testing for differences in Medicaid application rates across individual Food Stamp treatment types. Results are shown in Table 4. There is no difference in pre-experiment Medicaid application rates by treatment status (and about 34 percent of experiment participants had 14

16 previously applied for Medicaid). Full treatment recipients are about 60 percent more likely to apply for Medicaid after the experiment than those with less intensive treatments, 12 percent vs. 7 percent, respectively. The difference just hovers at statistical significance at the 10 percent level (with standard errors clustered at the office level), but is significant with p=0.07 when prior Medicaid status is controlled at the individual level. D. Survey Results Table 5 reports responses to the survey that was administered to all participants regardless of treatment group at the end of the outreach. As shown in Panel A, just over one-quarter of clients indicated that they had previously applied to the Food Stamp Program (a number significantly smaller than the one-third that had prior case records from the county, suggesting that clients either did not remember correctly, or they did not want to reveal this information). Of those clients who reported that they had previously applied, in Panel B 27 percent were currently receiving benefits, and 25 percent were ineligible at their last application. 8.5 percent of respondents said they enrolled at the time, but let their benefits expire. 6.1 percent said that they enrolled at the time, but then became ineligible for further benefits. Interestingly, a substantial number of clients volunteered the information that they became ineligible because they began working, and it is not clear whether their wages made them ineligible or if they had a misperception about the availability of benefits to workers percent responded that their experience from their last application was that the hassle was not worth it. 15

17 Panel C shows the reasons clients supplied if they had never previously applied for the program. Over 40 percent responded that they did not think that they were eligible, and another 8.5 percent perceived that the hassle was not worth it. Notably, only 1 percent responded that they did not apply because they would be treated poorly at the Food Stamp office. Almost half of the respondents said that they had not heard of the program, though this could be in part due to the change in wording in Golden State Advantage offices. Conclusions This paper presents preliminary analysis of an outreach conducted in H&R Block Tax Preparation offices in San Francisco and Alameda Counties in California. We find that clients are quite responsive to the language used in the outreach, and are significantly more likely to be interested in benefits if the words Food Stamps are not directly stated. Preliminary results also suggest that clients are more likely to apply and enroll in the program if they are provided more detailed information, and if they do not have to go to the Food Stamp office. There is also some evidence that they are marginally more likely to apply for Medicaid benefits if the burden of the Food Stamp application is reduced. Finally, survey results suggest that there is substantial misunderstanding about eligibility and unawareness of the program among low-income working families. In future drafts, we will be able to stratify the results on client characteristics, such as whether the client has any wage earning, the age and marital status of the householder, and the presence of children. In addition, we will add results from Alameda County. 16

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19 REFERENCES Bartlett, Susan, Nancy Burstein, and William Hamilton (2004). Food Stamp Program Access Study: Final Report. E-FAN Blank, Rebecca and Patricia Ruggles (1996). When do Women Use Aid to Families with Dependent Children and Food Stamps? The Dynamics of Eligibility versus Participation. Journal of Human Resoucres 31(1). Daponte, Beth Osborne, Seth Sanders and Lowell Taylor (1999). Why Do Low-Income Households not Use Food Stamps? Evidence from an Experiment. Journal of Human Resources, 34(3). Duflo, Esther, William Gale, Jeffrey Liebman, Peter Orszag and Emmanuel Saez (2005). Saving Incentives for Low- and Middle-Income Families: Evidence from a Field Experiment with H&R Block, NBER Working Paper # Fellowes, Matt and Alan Berube (2005). Leaving Money (and Food) on the Table: Food Stamp Participation in Major Metropolitan Areas and Counties, The Brookings Institution: Survey Series. McConnell, Sheena and Michael Ponza (1999). The Reaching the Working Poor and Poor Elderly Study: What We Learned and Recommendations for Future Research. Mathematica Policy Research, Washington DC. Nichols, Albert L. and Richard Zeckhauser (1982). "Targeting Transfers through Restrictions on Recipients," American Economic Review 72(2),

20 Table 1: Aggregate Interest Level, by Experimental Group Total Presentation Type Eligible Clients Already Enrolled Interested Not Interested Percent of nonenrolled Percent of nonenrolled Number Percent Number Number FS 7, , , GSA 13, , , Overall 21,255 1, , ,

21 Table 2: Summary Statistics by Treatment Group Office-Level Treatments Individual-Level Treatments FS office GSA office Regular Plus Full (1) (2) (3) (4) (5) Number of exemptions Total AGI Total wages Wages < 1000/year Client's age Have checking acct ** Have savings acct N

22 Table 3: Applications and Enrollment in FS Program Any Pre-HRB App = 1 Any Post-HRB App = 1 Successful or Pending HRB App = 1 (1) (2) (3) (4) (5) (6) (7) (8) (9) Plus (0.021)* (0.023)* (0.023)* (0.040) (0.040) (0.040) (0.040) (0.040) (0.040) Full (0.030) (0.030) (0.030) (0.053)** (0.053)** (0.052)** (0.053)** (0.053)** (0.052)** =1 if GSA office (0.054)* (0.043) (0.044) Constant (0.034)** (0.041)** (0.015)** (0.027)** (0.036)** (0.030)** (0.027)** (0.036)** (0.030)** Office fixed effects no no yes no no yes no no yes Observations R-squared

23 Table 4: Medicaid Applications by Food Stamp Treatment Type Any pre-experiment Medicaid Any post-experiment Medicaid application =1 application =1 (1) (2) (3) (4) (5) (6) Plus (0.025) (0.027) (0.027) (0.023) (0.022) (0.024) Full (0.026) (0.026) (0.022) (0.027) (0.027) (0.027) =1 if GSA office (0.052) (0.035) Constant (0.036)** (0.042)** (0.015)** (0.014)** (0.022)** (0.017)** Office fixed effects no no yes no no yes Observations R-squared

24 Table 5: Responses to Survey Questions Percent Panel A Have you applied for benefits before today? Yes 25.9 No 70.1 Refused 4.0 Panel B If yes: What happened Last Time Applied? Currently enrolled 26.8 Not eligible last time 25.0 Hassle not worth it 15.5 Enrolled then, now expired 8.5 Enrolled, then ineligible 6.1 Application in process now 1.1 Don't know/refused 17.1 Panel C If no: Why Never Applied Before? Never heard of program 47.7 Did not think eligible 40.8 Hassle not worth it 8.5 Treated badly at office 1.1 Just never applied 0.8 Didn't need/want 0.5 Didn't know how to apply 0.4 Don't know/refused

25 Appendix A: Examples of Types of Outreach Materials 24

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